Consumer Sentiment Index Reaches 5-Year High

“Confidence among U.S. consumers climbed to a five-year high in November, improving the prospects of bigger spending gains that will help spur the expansion. The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to 84.9, the fourth straight increase and the highest since July 2007, from 82.6 in October. Economists projected an initial reading of 82.9 for November, according to the median estimate of 71 economists surveyed. … “ http://tinyurl.com/adzy7sw

COMPARING THREE INDEXES OVER THE PAST DECADE

The chart below compares the movement of the consumer sentiment index to the movement of two indexes that are tied to investor sentiment – the S&P 500® (SPX) Index and CBOE Volatility Index (VIX®). Over the past decade, the SPX is up about 50%, the consumer sentiment index is roughly unchanged, and the VIX is down about 32%. One might think about different factors – unemployment, inflation, globalization, debt levels, entitlements, wars – that could have differing impacts on the stock indexes and consumer sentiment index.

On the topic of sentiment and investing, I found it interesting to read an October Barron’s interview of Gus Sauter, the Chief Investment Officer of Vanguard, who was quoted as follows:

“I’m 90%-plus [in equities]. I like the fact that everyone is worried about the stock market. That’s when the market is set up to do well. When people throw caution away, I get nervous.”

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